question
A pure monopoly is an industry in which:
a. one firm is the producer or seller of a product with close, but not perfect,
substitutes.
b. one firm is the sole producer or seller of a product that has no close substitutes.
c. there are no barriers to prevent other firms from entering the industry.
d. the price is determined by market forces but output is determined by the seller.
a. one firm is the producer or seller of a product with close, but not perfect,
substitutes.
b. one firm is the sole producer or seller of a product that has no close substitutes.
c. there are no barriers to prevent other firms from entering the industry.
d. the price is determined by market forces but output is determined by the seller.
answer
b. one firm is the sole producer or seller of a product that has no close substitutes.
question
All of the following are examples of barriers to entry except:
a. patents and copyrights.
b. government franchises and licenses.
c. constant returns to scale.
d. sole ownership of key resources.
a. patents and copyrights.
b. government franchises and licenses.
c. constant returns to scale.
d. sole ownership of key resources.
answer
c. constant returns to scale
question
The demand curve for a monopoly firm is:
a. more elastic than the industry, or market, demand curve for its product.
b. less elastic than the industry, or market, demand curve for its product.
c. the same as the industry, or market, demand curve for its product.
d. perfectly inelastic at the output where MR=MC.
a. more elastic than the industry, or market, demand curve for its product.
b. less elastic than the industry, or market, demand curve for its product.
c. the same as the industry, or market, demand curve for its product.
d. perfectly inelastic at the output where MR=MC.
answer
c. the same as the industry, or market, demand curve for its product
question
If electrical service can be more efficiently provided to a market by a single
supplier than by many competing suppliers, the market is considered to be a(n):
a. rent-seeking monopoly.
b. output-maximizing monopoly.
c. natural monopoly.
d. efficient monopoly.
supplier than by many competing suppliers, the market is considered to be a(n):
a. rent-seeking monopoly.
b. output-maximizing monopoly.
c. natural monopoly.
d. efficient monopoly.
answer
c. natural monopoly
question
Which of the following is always true for a monopolist?
a. Profit is maximized where marginal revenue equals marginal cost.
b. Economic profit is positive in both the short run and the long run.
c. Consumer surplus is zero because the monopoly price is greater than the competitive price.
d. All of the above are always true for a monopolist.
a. Profit is maximized where marginal revenue equals marginal cost.
b. Economic profit is positive in both the short run and the long run.
c. Consumer surplus is zero because the monopoly price is greater than the competitive price.
d. All of the above are always true for a monopolist.
answer
a. Profit is maximized where the marginal revenue equals marginal cost
question
A monopolist that earns positive economic profit in short-run equilibrium will:
a. definitely continue to earn positive economic profit in the long run.
b. earn positive economic profit in the long run if it can maintain barriers to entry, assuming no changes in costs or market demand.
c. earn higher economic profit in the long run because of economies of scale.
d. earn economic profit equal to zero in long-run equilibrium.
a. definitely continue to earn positive economic profit in the long run.
b. earn positive economic profit in the long run if it can maintain barriers to entry, assuming no changes in costs or market demand.
c. earn higher economic profit in the long run because of economies of scale.
d. earn economic profit equal to zero in long-run equilibrium.
answer
b. earn positive economic profit in the long run if it can maintain barriers to entry, assuming no changes in costs or market demand.
question
First-degree (perfect) price discrimination occurs when:
a. the seller is able to charge each buyer the highest price the buyer will pay.
b. the seller offers a volume discount to buyers who are willing to purchase more.
c. the seller is able to separate customers into two different groups and charge one group a higher price than the other group is charged.
d. the price charged to all buyers is the same as the competitive price.
a. the seller is able to charge each buyer the highest price the buyer will pay.
b. the seller offers a volume discount to buyers who are willing to purchase more.
c. the seller is able to separate customers into two different groups and charge one group a higher price than the other group is charged.
d. the price charged to all buyers is the same as the competitive price.
answer
a. the seller is able to charge each buyer the highest price the buyer will pay.
question
Second-degree price discrimination occurs when:
a. the seller is able to charge each buyer the highest price the buyer will pay.
b. the seller offers a volume discount to buyers who are willing to purchase more.
c. the seller is able to separate customers into two different groups and charge one group a higher price than the other group is charged.
d. the price charged to all buyers is the same as the competitive price.
a. the seller is able to charge each buyer the highest price the buyer will pay.
b. the seller offers a volume discount to buyers who are willing to purchase more.
c. the seller is able to separate customers into two different groups and charge one group a higher price than the other group is charged.
d. the price charged to all buyers is the same as the competitive price.
answer
b. the seller offers a volume discount to buyers who are willing to purchase more.
question
In order to engage in price discrimination, a seller must be able to:
a. prevent customers from re-selling the product to other customers.
b. charge a lower price to customers with more elastic demand.
c. charge a higher price to customers with more inelastic demand.
d. do all of the above.
a. prevent customers from re-selling the product to other customers.
b. charge a lower price to customers with more elastic demand.
c. charge a higher price to customers with more inelastic demand.
d. do all of the above.
answer
d. all of the above
question
A producer of widgets is most likely to be a monopolist when:
a. there are no close substitutes for widgets and there are barriers to entry into the widget industry.
b. a single firm owns the patent for producing widgets, but other firms can sell
gadgets that are a close substitute for widgets.
c. there are no close substitutes for widgets and there are no barriers to entry into the widget industry.
d. there are close substitutes for widgets.
a. there are no close substitutes for widgets and there are barriers to entry into the widget industry.
b. a single firm owns the patent for producing widgets, but other firms can sell
gadgets that are a close substitute for widgets.
c. there are no close substitutes for widgets and there are no barriers to entry into the widget industry.
d. there are close substitutes for widgets.
answer
a. there are no close substitutes for widgets and there are barriers to entry into the widget industry.
question
Which of the following is true for a profit-maximizing monopolist that charges
all consumers the same price?
a. P > MR = MC
b. P < MR = MC
c. P > MR > MC
d. P = MR = MC
all consumers the same price?
a. P > MR = MC
b. P < MR = MC
c. P > MR > MC
d. P = MR = MC
answer
a. P > MR = MC
question
From society's perspective:
a. monopoly markets are more efficient than competitive markets.
b. there is no difference between the outcome in monopoly markets and competitive markets.
c. it is never good to have only one firm service an entire market.
d. competition generally leads to lower prices, higher output, and greater efficiency than monopoly.
a. monopoly markets are more efficient than competitive markets.
b. there is no difference between the outcome in monopoly markets and competitive markets.
c. it is never good to have only one firm service an entire market.
d. competition generally leads to lower prices, higher output, and greater efficiency than monopoly.
answer
d. competition generally leads to lower prices, higher output, and greater efficiency than monopoly.
question
At the profit-maximizing level of output for an unregulated monopolist:
a. marginal benefit exceeds marginal cost which creates a deadweight loss.
b. marginal cost exceeds marginal benefit which creates a deadweight loss.
c. marginal benefit equals marginal cost which is efficient.
d. price is equal to marginal cost but price is greater than marginal revenue.
a. marginal benefit exceeds marginal cost which creates a deadweight loss.
b. marginal cost exceeds marginal benefit which creates a deadweight loss.
c. marginal benefit equals marginal cost which is efficient.
d. price is equal to marginal cost but price is greater than marginal revenue.
answer
a. marginal benefit exceeds marginal cost which creates a deadweight loss.
question
Government addresses the potential inefficiency associated with monopoly markets by:
a. requiring all firms to seek government approval before raising prices.
b. blocking all proposed mergers.
c. restricting market power through antitrust laws and regulation.
d. protecting monopolies from the forces of competition.
a. requiring all firms to seek government approval before raising prices.
b. blocking all proposed mergers.
c. restricting market power through antitrust laws and regulation.
d. protecting monopolies from the forces of competition.
answer
c. restricting market power through antitrust laws and regulation.
question
All of the following are characteristics of a monopolistically competitive industry except:
a. there are many firms in a monopolistically competitive industry.
b. the firms in the industry produce goods that are close, but not perfect, substitutes.
c. there are no significant barriers to entry into the industry.
d. the firms in the industry engage in interdependent decision making.
a. there are many firms in a monopolistically competitive industry.
b. the firms in the industry produce goods that are close, but not perfect, substitutes.
c. there are no significant barriers to entry into the industry.
d. the firms in the industry engage in interdependent decision making.
answer
d. the firms in the industry engage in interdependent decision making.
question
A monopolistically competitive firm's demand curve is ___________ elastic than a
perfectly competitive firm's demand curve and _____________ elastic than a
monopolistic firm's demand curve for the same product.
a. more; less
b. less; less
c. more; more
d. less; more
perfectly competitive firm's demand curve and _____________ elastic than a
monopolistic firm's demand curve for the same product.
a. more; less
b. less; less
c. more; more
d. less; more
answer
d. less; more
question
Monopolistically competitive firms derive some degree of market power from:
a. high barriers to entry.
b. perfect information.
c. mutual interdependence with other firms.
d. product differentiation.
a. high barriers to entry.
b. perfect information.
c. mutual interdependence with other firms.
d. product differentiation.
answer
d. product differentiation.
question
Like a perfectly competitive firm, a monopolistically competitive firm:
a. has some control over the price it charges.
b. sets price above marginal cost.
c. maximizes profit by producing the quantity where marginal revenue equals
marginal cost so long as price exceeds average variable cost.
d. All of the above statements are true.
a. has some control over the price it charges.
b. sets price above marginal cost.
c. maximizes profit by producing the quantity where marginal revenue equals
marginal cost so long as price exceeds average variable cost.
d. All of the above statements are true.
answer
c. maximizes profit by producing the quantity where marginal revenue equals marginal cost so long as price exceeds average variable cost.
question
For monopolistically competitive firms in long-run equilibrium, economic profit is:
a. positive because their products are unique.
b. positive because their products are differentiated.
c. zero because there are no barriers to entry.
d. zero because of strong barriers to entry.
a. positive because their products are unique.
b. positive because their products are differentiated.
c. zero because there are no barriers to entry.
d. zero because of strong barriers to entry.
answer
c. zero because there are no barriers to entry.
question
An industry dominated by a few large firms whose pricing and output decisions are dependent on one another is:
a. illegal in the United States.
b. monopolistically competitive.
c. monopolistic.
d. oligopolistic.
a. illegal in the United States.
b. monopolistically competitive.
c. monopolistic.
d. oligopolistic.
answer
c. monopolistic.
question
The characteristic that distinguishes oligopoly from other market structures is:
a. the existence of barriers to entry.
b. interdependence among firms in pricing and output decisions.
c. product differentiation.
d. the ability of firms to earn long-run economic profits.
a. the existence of barriers to entry.
b. interdependence among firms in pricing and output decisions.
c. product differentiation.
d. the ability of firms to earn long-run economic profits.
answer
b. interdependence among firms in pricing and output decisions.
question
To be successful in increasing prices for their product, members of a cartel must:
a. produce as much as they can.
b. encourage new firms to enter the market.
c. agree to limit their output.
d. find ways to lower costs of production.
a. produce as much as they can.
b. encourage new firms to enter the market.
c. agree to limit their output.
d. find ways to lower costs of production.
answer
c. agree to limit their output.
question
Behavior in which a dominant firm's pricing strategy is followed by other firms in the
industry is called:
a. oligopoly power.
b. contestable behavior.
c. price leadership.
d. cartel membership.
industry is called:
a. oligopoly power.
b. contestable behavior.
c. price leadership.
d. cartel membership.
answer
c. price leadership.
question
The game theory model assumes that:
a. firms anticipate rival firms' decisions when they make their own decisions.
b. firms ignore rival firms' decisions when they make their own decisions.
c. markets are contestable because there are no barriers to entry.
d. a firm will always follow the pricing strategy of the dominant firm in
the industry.
a. firms anticipate rival firms' decisions when they make their own decisions.
b. firms ignore rival firms' decisions when they make their own decisions.
c. markets are contestable because there are no barriers to entry.
d. a firm will always follow the pricing strategy of the dominant firm in
the industry.
answer
a. firms anticipate rival firms' decisions when they make their own decisions.
question
The marginal product of labor (MPL) is the:
a. change in total revenue that results from selling one more unit of output.
b. change in output that results from employing one more unit of labor.
c. additional revenue generated from employing one more unit of labor.
d. total revenue generated from the use of labor.
a. change in total revenue that results from selling one more unit of output.
b. change in output that results from employing one more unit of labor.
c. additional revenue generated from employing one more unit of labor.
d. total revenue generated from the use of labor.
answer
b. change in output that results from employing one more unit of labor.
question
Which of the following best represents a derived demand for labor?
a. The demand for tickets to the World Series by baseball fans
b. The demand for secretarial services by a publishing firm
c. The demand for new novels by recreational readers
d. The demand for the services of a pediatrician by new parents
a. The demand for tickets to the World Series by baseball fans
b. The demand for secretarial services by a publishing firm
c. The demand for new novels by recreational readers
d. The demand for the services of a pediatrician by new parents
answer
b. The demand for secretarial services by a publishing firm
question
In a competitive labor market, an increase in the supply of labor, ceteris paribus, will:
a. increase the demand of labor.
b. decrease the demand of labor.
c. increase the market wage rate.
d. decrease the market wage rate.
a. increase the demand of labor.
b. decrease the demand of labor.
c. increase the market wage rate.
d. decrease the market wage rate.
answer
d. decrease the market wage rate.
question
The market structure that satisfied the efficiency conditions of MB = MC and no deadweight loss is:
a. perfect competition.
b. monopolistic competition.
c. oligopoly.
d. monopoly.
a. perfect competition.
b. monopolistic competition.
c. oligopoly.
d. monopoly.
answer
a. perfect competition.
question
Which of the following is not true for a profit-maximizing monopolist?
a. Price is greater than marginal value
b. marginal revenue equals marginal cost
c. Profits equal total revenue minus total cost
d. marginal revenue is greater than price
a. Price is greater than marginal value
b. marginal revenue equals marginal cost
c. Profits equal total revenue minus total cost
d. marginal revenue is greater than price
answer
d. marginal revenue is greater than price
question
Monopolists:
a. always earn zero economic profits in the long run
b. can maintain short-run economic profits in the long run if barriers to entry exist
c. cannot exit the industry in the long run even if short-run economic losses persist
d. produce the output where price equals marginal cost
a. always earn zero economic profits in the long run
b. can maintain short-run economic profits in the long run if barriers to entry exist
c. cannot exit the industry in the long run even if short-run economic losses persist
d. produce the output where price equals marginal cost
answer
b. can maintain short-run economic profits in the long run if barriers to entry exist
question
Which of the following is a barrier to entry?
a. diseconomies of scale
b. government franchises and licenses
c. sole ownership of a key resource
d. all of the above
e. (b) and (c) only
a. diseconomies of scale
b. government franchises and licenses
c. sole ownership of a key resource
d. all of the above
e. (b) and (c) only
answer
e. (b) and (c) only
question
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